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  • 108 B C A C A

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    Camilus Ortillo
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    You are the division president of Stable Division of Giga-Corp. Your friend, Ligia, is the division president of Giga-Corp.’s Turmoil Division. These are the only divisions. Each division has 5,000 employees. Last year, Stable Division had a turnover of 1,000 employees (1,000 employees left and 1,000 were hired). Turmoil Division had a turnover of 4,000 employees. There were no transfers between divisions. Giga-Corp.’s Personnel Department only provides services to Stable and Turmoil and only when an employee leaves or is hired. The total cost of the Personnel Department last year was $100,000.

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    108-B-C-A-C-A_(367)

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    You are the division president of Stable Division of Giga-Corp. Your friend, Ligia, is the division president of Giga-Corp.’s Turmoil Division. These are the only divisions. Each division has 5,000 employees. Last year, Stable Division had a turnover of 1,000 employees (1,000 employees left and 1,000 were hired). Turmoil Division had a turnover of 4,000 employees. There were no transfers between divisions. Giga-Corp.’s Personnel Department only provides services to Stable and Turmoil and only when an employee leaves or is hired. The total cost of the Personnel Department last year was $100,000.

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    Download as DOC, PDF, TXT or read online from Scribd
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    74 views2 pages

    108 B C A C A

    Uploaded by

    Camilus Ortillo
    You are the division president of Stable Division of Giga-Corp. Your friend, Ligia, is the division president of Giga-Corp.’s Turmoil Division. These are the only divisions. Each division has 5,000 employees. Last year, Stable Division had a turnover of 1,000 employees (1,000 employees left and 1,000 were hired). Turmoil Division had a turnover of 4,000 employees. There were no transfers between divisions. Giga-Corp.’s Personnel Department only provides services to Stable and Turmoil and only when an employee leaves or is hired. The total cost of the Personnel Department last year was $100,000.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    of 2

    You are the division president of Stable Division of Giga-Corp. Your friend, Ligia, is the division president of Giga-Corp.

    s Turmoil Division. These are the only divisions. Each division has 5,000 employees. Last year, Stable Division had a turnover of 1,000 employees (1,000 employees left and 1,000 were hired). Turmoil Division had a turnover of 4,000 employees. There were no transfers between divisions. Giga-Corp.s Personnel Department only provides services to Stable and Turmoil and only when an employee leaves or is hired. The total cost of the Personnel Department last year was $100,000. Required a. As the Stable Division president, how would you recommend the cost of the Personnel Department be allocated? What arguments would you use to support your claim? b. As the Turmoil Division president, how do you think Ligia will recommend allocating the cost of the Personnel Department? Why? c. You are going to be transferred to Turmoil Division, but before the transfer, GigaCorp.s CEO asks you to recommend an allocation method. How would you recommend the cost of the Personnel Department be allocated? What arguments would you use? d. Is it ethical to recommend different allocation methods depending on which division you will be heading? SOLUTION a. The president of Stable Division would probably prefer to allocate Personnel costs on turnover. You could argue that turnover represents the use of Personnel and Personnel resources. b. Ligia might argue that the cost of Personnel should be allocated on the basis of number of employees, because Personnel costs are incurred to provide the capability to handle turnover.

    c.

    Notice that the view of the correct allocation method depends on where you sit. Next year, your arguments in (a) might seem to be incorrect.

    d.

    If you recommend different allocation bases depending on which division you will be heading, you cannot be basing your recommendation solely on what you believe to be the best one for assigning cost. Whether or not this is ethical, it will lessen your credibility.

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